SENATE APPROVES CHILD TAX CREDIT IN LOWER BRACKET

By DAVID FIRESTONE

Published: June 6, 2003

WASHINGTON, June 5—
The Senate voted overwhelmingly today to give an increased child tax credit to millions of low-income families who did not receive it in the new tax law, moving rapidly to quell an issue that Democrats had used to portray Republicans as brutish toward the poor.

The vote was 94 to 2. Both opponents, Senators Don Nickles and James M. Inhofe, are Republicans from Oklahoma. Mr. Nickles said he objected to increasing the refund to people who did not pay federal income taxes.

The bill, which would allow 6.5 million minimum-wage families to begin receiving checks of $400 per child, now goes to the House, where its prospects are uncertain. Two senior House Republican officials said today that House leaders would vote for the increased child credit only as part of a much broader tax bill that could cost the Treasury about $100 billion. That could cost the bill Senate support. The Senate bill is projected to pay for itself with increased customs fees and would not come at a cost to the Treasury.

But a Bush administration official said White House aides had concluded that there was political peril in being perceived as opposing a tax break for low-income working people, and that President Bush was likely to signal House Republicans soon that they should compromise with the Senate.

Anticipating objections from the House, the bill approved by the Senate today added several more provisions favored by Republicans to the original relief for the minimum-wage families. The most significant would extend the full $1,000 child credit -- increased from $600 in the new tax law -- in 2010 to married couples making $110,000 to $150,000. Under current law, the credit begins to phase out for couples making $110,000.

The new provision would allow some couples earning up to $200,000 to receive a portion of the tax credit, depending on how many children they have.

Another provision would simplify the definition of a dependent child in the tax code, making it easier for several thousand families to take advantage of child-based provisions, and a third would ensure that families of military personnel who served in Iraq or Afghanistan would be eligible for the tax credit by treating combat pay as earned income.

The tax cuts in the bill add up to about $10 billion over 10 years, but the bill raises customs user fees by the same amount. Getting a neutral bill was crucial to winning the support of many Senate Democrats, but it could anger House members who object to the higher fees.

After the deal was put together this afternoon, the House Republican leader, Representative Tom DeLay, seemed to soften his position on the child credits, saying in a floor speech that the House would consider any legislation sent over by the Senate.

But the senior House official said the House was unlikely to rubber-stamp the bill approved today. In addition to the provisions in the Senate bill, House leaders also want to make the increased child credit, now scheduled to expire after 2004, permanent for taxpayers eligible to receive it, the official said. Senators from each party urged the House not to delay its approval of the bill with ideological battles, in the hope that the 6.5 million families making $10,500 to $26,625 would receive their refund checks next month. If the bill is not approved in June, those families will not receive their checks at the same time as 25 million middle-class families.

''I encourage our colleagues in the House to take this bill seriously, to move forward with it quickly,'' said Senator Blanche Lincoln, Democrat of Arkansas, who led the fight for the increased credits. ''This gives us an opportunity to reach out to these hardworking Americans and give them the same opportunity of relief from this tax bill that we're giving everybody else in this country.''

Senator Charles E. Grassley, the Iowa Republican who is chairman of the Finance Committee, said the other provisions were added to today's bill to encourage House Republicans to vote for it and to dissuade Senate Republicans from objecting.

''I have no vote in the House, obviously,'' said Mr. Grassley, who has frequently clashed with more-ideological tax writers in the House. ''What's going to make them accept it is whether or not they want this group of people, particularly people in the military who are sacrificing their freedom for our freedom, to get the same benefit everybody else is going to get who has children in their family.''

Today's vote took place as pressure began to mount on Republicans to provide the tax credit to the 6.5 million families, who were excluded from the credit in last-minute Republican negotiations over the tax law signed by President Bush last week. Democrats in each chamber have been holding daily news conferences to denounce the decision, capitalizing on an issue that they say illustrates the fundamental unfairness of the new tax law. In today's news conference, Senator Hillary Rodham Clinton of New York accused the administration of ''waging war on poor children'' by undermining programs for working families.

Also today, a group of religious leaders said they would hold a vigil across from the White House next week to demand tax benefits for low-income people, and one leader described the issue in stark moral terms.

''If biblical prophets like Amos and Isaiah had read this week's news about what happened to child tax credits for low-income families, they would surely be out screaming on the White House lawn about the justice of God,'' said Jim Wallis, an evangelical Christian who is the head of Call to Renewal, a church organization that fights poverty. Mr. Wallis has met with administration officials several times over the past few years to support the White House effort to allow religious groups to compete for government grants.

The administration official said that Mr. Bush, who has been traveling in Europe and the Middle East for the past week while the battle over the child credit heated up, has not yet decided on a strategy for dealing with the issue but was unlikely to let it drag out to the benefit of Democrats.

''There is absolutely a recognition on the part of the White House and the administration at large that this is a real issue, an issue with staying power,'' the official said. ''The thinking is, let's grab this and be on the right side here. At some point a signal will be sent, but we're not there yet.''

Although almost every Senate Republican voted for the bill, some clearly were unhappy at having to do so under what they considered public pressure from liberal groups and Democrats. Senator Trent Lott of Mississippi voted for the bill, but as he did so he stuck his tongue out, put his finger in his mouth and made a gagging sound, indicating his apparent distaste for the bill.